Subsidy and Local Bus Service Deregulation in Britain: A Re-evaluation

Peter Romilly

Journal of Transport Economics and Policy, 2001, vol. 35, issue 2, 161-193

Abstract: Local bus services in Britain (excluding London) were deregulated in October 1986. Bus vehicle kilometres increased after deregulation, but passenger journeys fell and bus fares increased in real terms. The inability to reverse the long-run decline in passenger journeys and the increase in bus fares is often cited as evidence of the failure of deregulation to promote greater competition in the industry. This evaluation is not clear-cut, however, since government macroeconomic policy caused significant reductions in subsidy to the bus industry concurrent with deregulation. It can be argued that it is the reduction in subsidy, rather than the lack of competition, which caused fares to increase. If this is the case, then the evaluation of deregulation should allow for the effects of subsidy reduction. This paper specifies and tests an econometric model in which the role of subsidy reduction is explicitly incorporated in a price-markup equation. The model can be used to generate forecasts of bus fares and passenger journeys after allowing for subsidy replacement. These forecasts are compared with those for the continuation of the regulated system. A cost-benefit analysis calculates the net present value of the internal and external welfare gains from deregulation per se in Britain excluding London for 1986-97. A similar analysis is conducted for the metropolitan and non-metropolitan areas of Britain. ? The London School of Economics and the University of Bath 2001

Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.catchword.com/cgi-bin/cgi?ini=bc&body=l ... 0010501)35:2L.161;1- (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tpe:jtecpo:v:35:y:2001:i:2:p:161-193

Access Statistics for this article

Journal of Transport Economics and Policy is currently edited by B T Bayliss, S A Morrison, A Smith and D Graham

More articles in Journal of Transport Economics and Policy from University of Bath
Bibliographic data for series maintained by Christopher F. Baum ().